News & Press: IoDSA in the Press

Consensus on boards vital for executive appointments

Wednesday, 16 July 2014   (0 Comments)
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The recent permanent appointment of Hlaudi Motsoeneng as COO of the SABC highlights some of the governance issues faced by public sector boards. According to board appraisal benchmarking data recently compiled by the Institute of Directors in Southern Africa (IoDSA) on the basis of submissions by directors serving in the public sector, public sector boards, according to their own admission, perform poorly when it comes to the relationship between the board and its executive team.

"News reports indicate that when it came to making the appointment permanent, the SABC board was split down the middle, with 5 of the board members present not supporting the decision,” says Parmi Natesan, Senior Governance Specialist at the IoDSA. "Whatever the facts are, it’s worth noting that when a senior appointment like this is made, the board’s decision should wherever possible be based on a consensus, not a majority vote. If an executive does not enjoy the support of the full board, it is unlikely that a good working relationship can be established. The board as a whole needs to feel confident the company is in the right hands, and the executives need to know they have broad support from the board. ”

Another challenge highlighted by non-executive directors serving on public sector boards who were surveyed for the IoDSA’s benchmarking exercise is the role played by the shareholding ministry in the appointment of executives. "It is important for the shareholder to consult with the board to determine the knowledge, skills and experience needed before making any appointments. Without such consultation, these changes to the leadership run the risk of being ineffective and perceived as political appointments.”

This good practice is evidently followed with regards to the appointment of a permanent CEO for Eskom, where the Eskom board is reported to have made a submission to newly appointed Public Enterprises Minister Lynne Brown on their views on the appointment.

"Specifically with regards to executive appointments, best practice would be for the board, in its collective judgment to undertake in-depth due diligence of potential appointees prior to recommending them for appointment,” says Natesan.

"Following a proper recruitment and due diligence process for key appointments like this would ensure that the appointee has the necessary knowledge, skills, experience and personal attributes to effectively fulfill his or her duties. By doing the right homework and making the right enquiries, the likelihood of success would be dramatically increased. ”

Global experience in the private sector has established that corporate performance is strongly impacted by board performance. As the IoDSA’s benchmarking data shows, South Africa’s public sector views itself as lagging behind the private sector in this area, which could be contributing to the sector’s underperformance.